Offers by banks to pay cash lump sums to people who take out home loans are disappearing, and tougher stress tests are making it harder to meet lending criteria, says a major mortgage broker.

Mike Pero Mortgages chief executive Mark Collins said cashbacks were getting smaller and harder to get.

Collins said six months ago home-buyers were able to get $5000 to $7000 in cash from their bank by switching or taking out a new mortgage.

"5k was the average six months ago. And now we are probably getting more zeros."

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It was still possible to get a cash sweetener but it was likely to be between $3000 to $5000 and only for the right client and from certain banks, Collins said.

Incentives have been a feature of the mortgage market for a number of years, with banks trying to woo customers by giving away TVs, iPads, phones and cash.

Collins said the giveaways had started around the time when ANZ re-branded its National Bank brand under the same name, and other banks tried to grab customers and a bigger slice of the mortgage market.

In recent years banks had switched to mainly cash offers driven by customer demand.
But Collins said banks appeared to be trying to claw back their margins as they felt the squeeze from increased funding costs amid global uncertainty.

A Westpac spokeswoman confirmed cash payouts across the market had dropped. "The volume of cash contributions has dropped over the last few months in the market."
She put the change down to customer demand.

"More customers are looking beyond cash contributions when assessing the full value of their banking relationship. This includes service, rate, expertise and convenience."

An ANZ spokesman said it had not had a formal cashback offer in the market since 2015 although it would still negotiate a cash payment to cover costs.

"While we have no formal cashback offer in the market, in some circumstances, and as part of an overall home-loan offer, we will negotiate a cash contribution to help with costs associated with the property transaction for some home-loan customers.

"We understand that cashbacks have been declining recently, and tend to be more in line with property transaction costs."

Both ASB and BNZ said they assessed cashbacks on a case-by-case basis.

"Cash contributions are not part of our formal pricing offer. However, we assess each application on a case-by-case basis and encourage customers to talk to us so we can tailor a home-loan solution that meets their needs," an ASB spokesman said.

A BNZ spokeswoman said cash was offered in certain circumstances to cover the costs of moving house and switching your home loan.

Collins said he had also noticed bank stress tests had crept up, so some potential home-buyers were being squeezed out as they could not meet the serviceability criteria.

Banks typically add 1.5 per cent to 1.75 per cent to their current mortgage rates to gauge whether a customer can afford to continue paying their mortgage if interests rates rise.

He said stress-test rates had risen by 0.1 to 0.2 percentage points in recent months. "Most of the banks have raised test rates."